The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence

Posted: 12 Apr 2012

See all articles by Laura Povoledo

Laura Povoledo

University of the West of England - Bristol Business School

Date Written: May 31, 2010

Abstract

This paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a “New Open Economy” model can reproduce the observed fluctuations qualitatively. The answer is positive: both in the model and in the data the standard deviations of tradeable inflation, output and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. A key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks.

Keywords: New Open Economy Macroeconomics, Tradeable and Nontradeable Sectors, Business Cycles

JEL Classification: F41, E32

Suggested Citation

Povoledo, Laura, The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence (May 31, 2010). Available at SSRN: https://ssrn.com/abstract=2038255

Laura Povoledo (Contact Author)

University of the West of England - Bristol Business School ( email )

Frenchay Campus
Bristol, BS16 1QY
United Kingdom

HOME PAGE: http://www.povoledo.it

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